Conference Conversations: Founders on Building Defensible Companies in the AI Economy

This week, we're continuing our Conference Conversations series from last month's conference with a panel called "Building to Scale: Founders on Building Defensible Companies in the AI Economy."

In this panel, Conor Healy from the Yamaha Music Innovation Fund sits down with Stanley Vergilis from Tone3000, Mauhan Zonoozy from The Vinyl Bar in Shibuya,, and Jessica Powell from AudioShake

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The conversation gets real about what it actually takes to build defensible moats, how to fundraise from VCs to angel investors, and the mistakes founders make along the way. 

Whether you're building a startup, thinking about taking the leap, or just want to understand what's happening in the music tech startup world, this panel is packed with insights you won't want to miss.

The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Visit musictectonics.com to find shownotes and a transcript for this episode, and find us on LinkedIn, Twitter, and Instagram. Let us know what you think! 

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Episode Transcript

Machine transcribed

[00:00:00] Shayli: So now we heard from some investors always a great time, and now time to hear from some founders. Next up. We will be building to scale founders on building defensible companies in the AI economy.

Super excited for this one. We have some great panelists and moderating this conversation will be Connor Healy with Yamaha Music Innovation Fund. Let's give them a warm round of applause as they make their way onto stage.

[00:00:27] Conor: Uh, I guess it's just me chitchatting

 I'm more of, uh, not, didn't write anything. Sorry. If you're building a company though, you're gonna wanna stick around for this one. 'cause we have a stellar group of founders joining me.

And if we haven't met yet, my name is Connor Healy. I'm a part of Yamaha's new Music Innovation Fund.

If you're building a company, we have three stellar founders that are up here today. They have a wealth of knowledge and experience and insights that I think are gonna be really, really helpful. so I'm gonna introduce them quickly. my introduction will not be able to give their backgrounds justice.

 I'll start right here to my left. Stanley vergilis. He is the CEO and co-founder of Tone 3000. Which is the world's largest marketplace of tones using Nam technology, neural amp modeler. He's a second time founder. He, uh, founded a home services marketplace called Hux, and he's also been a touring artist himself.

 to his left we have Mauhan Zonoozy, who is the co-founder and CEO of Vinyl Bar in Shibuya. I challenge you to find a better company name than that. I think there's probably a pretty funny origin story that I hope we get today. Prior to founding Shibuya Mahan was leading innovation at Spotify. Before that, he was a partner at BCGX, where he was launching companies in part partnership with Fortune 500 brands.

And before that, he founded and sold a viral video company to Cricket Media. So he's also a second time founder himself. and to his left we have Jessica Powell, who is the co-founder and CEO of Audio Shake, which is an audio splitting technology that's unlocked a lot of new use cases and monetization opportunities for music Prior to audio shake, Jessica was a high ranking exec at Google.

You might have heard of it. some say she was sundar's right hand. so we're thrilled to have Jessica with us here today. before we dive in, since we're at a music conference. I wanna ask you all, what's your favorite song? Start with you Stanley.

[00:02:20] Stanley: thank you so much for having me, Connor. Um, I was listening to Playboy, Cardi Rockstar Maid on the way here.

[00:02:27] Conor: Love it. Contemporary Mauhan.

[00:02:29] Mauhan: hey guys. I'm a sad boy at heart, so James Blake, I need a forest fire.

[00:02:35] Conor: Heartwarming

Jessica.

[00:02:37] Jessica: I feel like when people send you briefing questions for panels, they send you all this stuff that actually you could totally do on the fly, and then they don't send this question.

It's like a really big commitment. I'm gonna, I'm using my one pass on this one.

[00:02:49] Conor: Okay, fair enough. Well then we'll start with you for the second one, which is favorite concert experience ever.

[00:02:56] Jessica: Okay, I can do favorite concert. My least favorite concert experience was my first concert experience, which was I was taken to new kids on the block and, um, and I was not into it. And then my, the second concert I went to right after that, I was, just going into high school and I saw Modest Mouse and they shouldn't have let me into the bar, but I got in and it was awesome.

[00:03:17] Conor: Float on to Mahan.

[00:03:18] Mauhan: Yeah, it was good. That was smooth. my favorite concert experience was I actually snuck into Lollapalooza one year and saw the DAF Punk Alive set the pyramid. so that was it.

[00:03:31] Conor: That is sweet.

[00:03:32] Stanley: Go with my first concert, which was The Beach Boys. I was five years old.

It kind of changed my life, probably why I'm a music founder now. Amazing.

[00:03:41] Conor: I'll, I'll chime in. Everclear, when I was, in third grade and I met Art Alex AKIs after at a steakhouse and I cried Tears of Joy meeting him. Favorite song is Mr. Brightside By The Killers. My favorite karaoke song gets the people going always.

So anyway, alright with that, now we can actually dive into the conversation here. so My Logline doesn't do your company's justice, so I'd love it if each of you were to kind of dive in. Explain your company's, you know, the origin story, what was the problem you're solving? Um, and maybe Mauhan we start with you because again, that name, that's a name you don't forget.

[00:04:15] Mauhan: Yeah. So we started a company called The Vinyl Bar in Shibuya, and we are a music software label. And so we're like any other music label instead dropping vinyls. We're pushing out apps. The focus is all around creativity and play. And so they're all apps that help people create and play with music in different ways.

 the. Core problem or like, the thing we saw was we basically just saw a lot of AI assisted creative technology coming out. And our hypothesis was that that would become quickly commoditized. Like it would be much easier, faster, cheaper to use this technology. But the problem we saw was that like a lot of the products that were coming out were, lame.

A lot of like text to music type stuff, no offense to whoever's doing the text to music. And we were just like, we could build new interfaces that, quote unquote consumerize this and make it fun, playful, and feel like playing an instrument rather than typing into a text box. And so that's our focus is building products that let you play music.

[00:05:07] Conor: Amazing,

[00:05:08] Stanley: Stanley. So my company's called Tone 3000. It's a, uh, marketplace of tones. started when I'm in a band. We were in a studio spending thousands of dollars a day for access to the studio. and I don't know if any of you guys have been in a recording studio, but the walls are just lined with analog music, equipment amplifiers, guitar pedals, bass pedals, speaker cabinets, compressors, limiters, very expensive.

 And the band would spend hours setting up this equipment in order to get tones that we loved. So we'd plug our guitar into a signal chain that's comprised of all of the gear. We'd try to get a performance that we'd commit to by the end of the day, but we're not the best musicians. By the end of the day, we wouldn't get the take that we wanted.

So we'd have to rehire the studio and reset up the signal chains, reset up all the analog gear. And so we wondered if we could capture a digital model of this analog equipment, that way we could go home, comfort of our couch, plug our instrument into a digital model of these chains, make progress on our record without having to pay these studio fees.

And so we discovered that there was an open source project called Neural Amp modeler that allowed you to do exactly that. And so we did it. We used the project. But what we noticed in, the process of doing this is that you had to, know how to code. And most musicians, most producers, most engineers, they don't know how to code most people that own analog equipment.

And so our core insight was what if we basically allowed anyone to use this open source technology to capture a digital model of their gear, even if you don't know how to code? And so we launched that. Uh, and within 24 hours, people from all over the world had captured a thousand models. so we were pretty excited about that.

We did one post in a Facebook group, for a neural amp modeler, and it started growing organically very fast. and then we figured, okay, if there's people all over the world who are capturing these digital models of gear, what if we created a marketplace, where people could share these models? So if you have access to a $5,000 amp, you can capture digital model and some kid in his basement can, uh, use that to make studio quality music.

So we launched that and, uh, in nine months we've grown from zero to about 200,000 monthly active users. people have captured 160,000 digital models of gear that have been downloaded 3 million times, and that's with zero marketing. so that is my company Tone 3000.

[00:07:35] Conor: Amazing. Jessica,

[00:07:36] Jessica: let's see. So how, how it started and what it is, um.

I was actually living in Shibuya, not at a vinyl bar. and my co-founder and I, we had to do a ton of karaoke 'cause we were living in Tokyo and working in Tokyo. and at some point we were just like, Ugh, karaoke would be so much better. This is all, this is, this is not gonna turn into a karaoke company.

Um, but like we were like, it would be so much better if you could just actually sing along to all the songs that you wanted to sing to. Like, we wanted to sing to old seventies and eighties, like punk and hip hop. And that's not in those books that you get. And, um, it was like one of like a thousands.

Ideas that we had during that time. We were like, what if you could make a better burrito? Right. Like, just things that you come up with. Like, I don't wanna pretend that like the heavens opened up and we were like, this is a business. No, we were just like, it'd be really great to like, you know, karaoke to what you wanna karaoke to.

And um, and then like years later, we're both back in, the Bay Area and at Tech Jobs and Luke who was, on the, like was on the AI side. He was like, you know, I actually feel like deep learning's gotten to the point where we could do that thing that we wanted to do back in Japan. And so we started playing around with ideas around how to do that and like ripped the vocals off a, a bunch of different songs.

It sounded terrible, but we got super excited. 'cause then we were like, well wait, if you could rip the vocals off, like if you pull the vocals off of a song, well why couldn't you pull apart all the instruments? If you could pull apart all the instruments? Well, why couldn't you do that with all sound? And if you could do that with all sound like.

Wouldn't you potentially, entirely change how people interact with and consume sound? And that got us really excited because it kind of started from this like karaoke and kind of j Dilla. A place of just like our own personal interest and, and both being musicians. And then we started thinking about audio at scale.

And so what we do is we separate sound, we work really broadly across, music and film and TV and broadcast and sports and a lot of tech and AI applications. And the one thing they all have in common is that you need to be able to get at the different components of sound. And that's what we do.

[00:09:24] Conor: Amazing. So now that we understand what. Where your companies are at today, I think it'd be awesome to understand the five year vision, right? In an ideal world, what do your companies look like five years from now? And Stanley, maybe we start with you.

[00:09:37] Stanley: So our business is pretty simple. We use AI deep learning specifically to allow people to create tones.

 but that's just a part of what makes a song. if you think about the ingredients of a song, the bottom, you've got a melody, like you could hum the Star Spangled Banner in your head. and then that melody could then fire an instrument, right? So you could have a trumpet play that melody. You could have a voice play that melody.

You could have a guitar play that melody. and then lastly, you have, tone, which is applied. examples of tones or reverb, distortion crunch, fuzz overdrive, saturation. There's zillions of tones. So right now we have a marketplace for tones. and all of the tones are user generated. We give people tools.

They create the tones. People from all over the world consume them. Uh, use them to make music. And so we're thinking about expanding into these other ingredients of the music making process. Can we give people tools that allow them to make digital instruments full register midi instrument from low C to high C with a text prompt or an audio prompt, or maybe both.

 same with a so that's a digital instrument, but the same we could do for, samples, which is splice, right? So we could even enter and start competing against splice, potentially. Um, and I know the CPO is here, so, where we're thinking about taking this is enabling our creator economy. right now we have literally hundreds of thousands of creators, to build the ingredients that enable anybody to, make studio quality music

[00:11:05] Conor: amazing,

[00:11:06] Stanley: Ma

[00:11:07] Mauhan: on our side, we're, so, we're very consumer. They saying like, we're not prosumer, we're not B2B by any means. So I think our five year vision's very much so to empower, hundreds of millions, if not billion people, to start to create music, and to be able to play music using our product or products.

And so that's where we're, chasing, and I think if we're really lucky, we'll, we'll also open a vinyl bar in Shibuya so that we can justify the name. I think part of that was always that if things went wrong and we had to, you know, pull the, the shoot and open a bar, that we could always go back to our VCs and be like, Hey, you knew this was coming.

Like you saw it on the checkbook. but yeah, I mean, we're our, we are, the way we were kind of thinking about now it's, we're launching, we call singles. We're launching apps that are more single feature music creation products. They're really fun and playful multimodal creators. but the hope is to land on a hit single that turns into an album and then that will be a.

Ideally a big consumer play. Love it, Jessica.

[00:11:58] Jessica: what we're trying to do is make sound or audio as editable accessible and as useful as possible. And that spans everything from creative use and these very, let's say, high touch creative workflows where we're iterating. Maybe one day we're iterating with a machine.

Maybe it's entirely offline, but whatever it is, you've got all these different basically like. Uh, probably more slow in artistic process, I would say. And then there's a lot of stuff that happens at scale with machines where sound is an information source. And so if you can split sound, you can get at a lot more information than you can if you're just listening to the full mix.

[00:12:36] Conor: Got it. I want us to shift gears to this concept of a moat. And I think moats can kind of manifest in many different ways, right? It can be proprietary tech. It can be community, product, even capital can become a moat as I think OpenAI and some of the large LLMs can assert. so I'd love to hear from each of you how you think about your own moats in developing them.

'cause there are a lot of builders in the audience that I think are, are trying to identify this for them selves and their companies as well. So Stanley, maybe we start with you.

[00:13:08] Stanley: So my company has three moats. the first is the marketplace itself. the second is the data that we collect from our users when they're creating tones.

 and then the third is our partner ecosystem. so I can talk about each of them briefly. So the marketplace itself, I mean, there's a reason why Craigslist is still around. It's a marketplace that has demand and supply. and so if you wanna compete with them, you have to recreate that demand. You have to recreate that supply.

That's very difficult to do because why would somebody. leave that ecosystem for yours if you don't have, the requisite demand or supply that's needed. Um, so our business is the same. we have a huge base of creators and a huge base of consumers. So one of our moats is if somebody wants to compete with us, then they have to recreate that supply base, all of the creators and all of the demand side, which is gonna be pretty hard.

 And so yeah, marketplaces are my favorite kind of business. my first company and this one, both marketplaces. the second is the data that we're collecting from users. So all of the data that we collect from users, all of the training data that we use in order to, create these tones we, then use in order to improve the models.

 and so that creates this data flywheel, whereas there are more participants in the ecosystem as more people, create tones. On our website, then we have more data that we can use in order to improve the quality of the model that generates tones. and hopefully, to the point where if somebody wants to compete with us, it would be very difficult 'cause they don't have data.

 and then the third is our partner ecosystem. So tone three thousand's built on an open source standard called Neural amp modeler. And we made that choice strategically because our goal is for neural amp modeler to become the standard. that other hardware companies and software companies adopt and that's already started happening.

There's over 35 companies, who support Neural Amp modelers. So if you wanna load a tone from tone 3000 in a guitar pedal, in a bass pedal in a plugin, they're increasingly more and more companies that support that. And so if you wanna compete with us, then you have to recreate that entire partner ecosystem too.

 there are a few other moats of ours, but those are probably the top three.

[00:15:14] Conor: Trifecta,

Mauhan

[00:15:16] Mauhan: Yeah, I mean I think when we think about moats on the consumer side, traditionally everyone thinks about like building sticky retentive products and user data and you know, personalization to the 18th degree. And I think that's stuff that we obviously do think about.

But, um, I saw one of the investors I was talking before was talking about like MCPs and, you know, now when I think a lot about our product, I think about, you know, for sure we have these strategies of saying, okay, we're. Gonna start verticalizing and building our, you know, our workflow in terms of using like many, many different models.

And then start to, you know, eventually with time, money, and scale, build our own models and workflows for music creation and delivery and personalization. But more and more like weeks go by, I really think actually owning really valuable APIs and endpoints is actually the future for moats. I actually think it's like becoming increasingly, difficult and challenging, if not kind of like silly to think that you're gonna.

Always with a, when software is becoming increasingly, uh, cheap and increasingly like ephemeral, I think we're already have way too many apps. We're gonna have way, way too many apps and like the MCP agentic orientation of how you navigate the internet and your phone and whatever is inevitable. And so I think smart companies, if you design for that world, right?

So you think like, okay, like fuck it, I, you know, anthropic. chat, GPT are gonna be actually stronger distribution points than something like TikTok. So stop building apps that are just purely for like social sharing and start thinking about APIs and endpoints so that your products surface into those ecosystems.

Um, so I dunno, I think that's how we're thinking about developing moat is being forward thinking, being ahead, not taking like, uh. Historically cliched consumer app advice and actually thinking about like, what's tomorrow look like? Not what's yesterday.

[00:16:54] Conor: Love that. Jessica?

[00:16:56] Jessica: Uh, on the moat side, I mean, there's a, a handful like, you know, we have pretty unique data partnerships and things like that, but I think the thing that is maybe the most relevant or interesting if most of the folks here are from the startup world is, we started with something that, um.

Is maybe counterintuitive or super intuitive depending on where you sit on the whole thing, which is that we went really small, so we went hyper, hyper specific. We, when we had this vision of what would happen one day. particularly in an AI forward world, around what was gonna happen with audio and sound, but we also felt that a lot of those use cases weren't here yet and that the buyers weren't here, the infrastructure wasn't there, so on and so forth.

On the other hand, we knew because we were musicians, because we had friends who worked in the industry that something like sync licensing is a huge pain point, not being able to get instrumentals for sync. Right. and so we went. Really, really focused into sync. Uh, and we went and pitched all of the sync departments that we could find on being able to get an instrumental for a track in a matter of seconds.

And I remember when we were out trying to raise initially, everyone thought we were like, no. Everyone was just like, why aren't you going consumer? Why aren't you going mass market? What are you doing? What is sync? What are stems? What are, but it was, it, ended up, and I can argue reasons, it was a good idea, reasons was a bad idea.

But whatever it is, that's what we did. But the reason where, where it has actually been really, really helpful I think, is that because we started in a very focused way and because that focus was very, very tied to being a good partner to the music industry and not coming and imposing a technology on them or going consumer and then trying to go into B2B, but rather building something that we knew was potentially a little bit disruptive.

That might make some, that generally people are gonna be super excited about, but also might make some people uncomfortable about. If you're Van Gogh and all of a sudden someone can pull a flower outta sunflowers, like, maybe you don't like that. You know your's Led Zeppelin, and you made this song and you put it into the world this way, and all of a sudden someone's pulling out your drums.

You might not like that Again, like the, you can debate it in all kinds of different ways, but we wanted to be, and on the whole, I'm in favor of all that stuff, right? Like we've been doing this for decades now with remixes, but. We wanted to be respectful about that debate and, and work hand in hand with rights owners and creators and artists.

And I think because we took this slower and smaller route to start, it built a lot of trust in the industry. And I think we, I think people trust us. They realized that we're, always trying to think first and foremost about our. content partners and what helps them and what helps give them more relevance and longevity and monetization and creative possibilities for their content.

 and that even if we at some point disagree about how to do that, that there'll be a conversation. And I think that, that to tech people, and I come from tech, right? Like I was a musician on the side, but I never worked in the music industry. I think for a lot of us. Myself included, that, that feels very counterintuitive because I think we tend to think of the world in a lot more transactional way, to talk about relationships and that kind of thing as being a moat sounds super fuzzy and unquantifiable.

I think it actually matters a lot when you're working with people that create art. And I think people don't forget how you started your business, what you built your business on the back of, and people may still do deals with you, but they won't. Ever forget how you started and it will bleed into your negotiations.

I saw this, I was at Google. It was YouTube, like, it will go into your negotiations forever. It's kind of part of your cultural DNA.

[00:20:13] Conor: Well said. I wanna shift the conversation outta fundraising, which I think is highly relevant to a lot of builders in this room. It's hard, right? You know, I can attest to having been building for the last few years. It's just, it's very, very difficult and I think, mm-hmm. You know, the interesting thing about all three of you is you have all raised venture funding, and you've done it from investors who aren't necessarily endemic to music, which is really impressive because, you know, sometimes for, fair or not, music technology gets, I, I'm gonna say unfairly stigmatized by Silicon Valley.

 so I'd love to hear from you guys, you know, how you were successful in your fundraising processes, maybe some tips and tricks for builders who are. You know, kind of starting on the fundraising journey and maybe Jessica, we start with you 'cause you know, belated congrats on your $14 million series

A.

It's no small

feat.

[00:21:05] Jessica: when we started it was really, really hard. I remember coming out of Google and, have, there were. Some other like peers of mine that I'd worked with that were going out and doing these massive, like a hundred million, $200 million rounds right out the gate. And I went and met with the same VCs and they were just like, anything but this, like anything but music, anything but audio.

Like what? And then I would spend like also 20 minutes of the 30 minute meeting trying to explain stems. Like it was just, it was bad on many, many, many fronts. and it's interesting because I think any of us that have ever had to sell anything, which I never actually had before, audio shake. but now you have to do it every single day As a founder,

If you're in anything where you're having to sell, right? Like, what's the first thing that someone will tell you is like, figure out who you have to sell to and figure out what they care about and go, don't go and sell to people that are never gonna buy your thing. Right? And yet, somehow I didn't do that with fundraising.

Like, instead I was like, let me go to the people that hate music that like, feel like there's no making money in this industry. That it's, you know, some sort of monopoly controlled by like three players. Like I, I was like, let me go talk to them, and which is not what I should have done, like in retrospect.

 and when those conversations went really poorly, I had a friend, in the industry who then introduced me to a bunch of music people and the conversation was completely different. So when we first raised, we raised, almost entirely from music people and from angels, and we spent 10 seconds on stem.

In fact, we didn't even have to define stems because they would've seen it in the email that there was this thing that could create stems, and they immediately knew what it was and what pain point it fixed for them. And the conversation was still so much more about. Their excitement. And when you have a conversation that's based on excitement, it if the person has the money, like that is not a hard check to get right.

And so we did everything, almost entirely through Angels at the start. and then in like the most recent, it flopped, like it flipped back to like traditional vc, because then you know, they're just looking at metrics and also. Guess what we do AI and they love ai. So, um, all of a sudden it was a brilliant idea that we had.

 but, I love our VCs by the way, just being clear. But I'm saying that like it was, a very different conversation once you could actually like, lead with metrics versus lead with a concept.

[00:23:09] Conor: Makes total sense. Mauhan,

[00:23:11] Mauhan: who here is trying to raise VC right now? Yeah. Don't do it. No, I'm just kidding.

[00:23:17] Jessica: But kind of not.

[00:23:19] Mauhan: I'll leave that one to you. what are my tips for raising vc? actually I, I have some these, maybe less strategy, more just like how I would do it. I think it's all, I hate to say it, but a lot of the cliches are very true.

Like I would exclusively pick who you take money from based on the personal. Like the personal relationship and the person. I think that's was by far the biggest lesson I learned raising. we raised from like a lot of VCs and we're, you know, got very lucky and we're sort of had this, like, I said it was like my first time being the hot girl in the room for a little bit.

 but yeah, I mean, in retrospect we got really lucky 'cause we picked people that we really enjoy working with and chatting with and, I think that's the biggest, biggest piece of advice I would have is just pick the, pick the right people and do not give. Two fucks about the name of their firm.

'cause that does not matter. Like really what matters is that person. so I would, I'd encourage that. in terms of, it's funny, like I chose similarly, right? Like music, I mean, we're all in music, I guess, here, right? it's like not what you wanna raise venture against, but if you say like, you know, it's hard to raise in music, then you're like, okay, consumer music, it's like this, you know, it's like you're really trying to nail it.

 so I actually think like you really need to find people that believe in, at least in my world, like believe in you and the vision, and that you will find something. And you have to just also be comfortable, both you and your investors, you know, being pretty, I would very upfront to say like, we don't know what this necessarily looks like.

Like I, and I know what it looks like today and I know it's gonna look a lot different in six months. And so I think just being able to articulate that with confidence that you're there to figure it out. Not necessarily like I have all the answers. Like I never have all the answers and I'm pretty open with that fact.

And I think it helps, to approach it like that. and I think like also, I mean this is just more like inside baseball, like get founders who refer you to other VCs, obviously like the VC to VC referrals. Not as strong, the founder to VC referrals, very strong. but yeah, I don't know if that's helpful, but hopefully it is.

 but I will say something that's completely like unrelated to what, Jessica was saying before. I'm also a huge fan of Jessica Ditter. Built her business. Um, and I think, like I would attest to everything she said about, how she came into the industry, a focused on a very specific pain point, but also focused on building the right relationships and doing it the right way is like a, I think like a huge bravo to how you should come into the market.

[00:25:27] Conor: It's well said and very thoughtful advice. Uh, stanley,

[00:25:31] Stanley: I mean, I think VCs invest in businesses with potential. And there's ways of, you know, increasing the odds that your business is gonna be a success. And I think one of the things that I learned very early on is just founder market fit. Like, is this a business that you, there's a problem that you've experienced firsthand, like it's a real problem?

 I think a very common mistake I've seen among first time founders is. They get really excited about the business, but they don't really talk much about what problem they're solving. and so for both of my companies, they were problems that I experienced firsthand. Like I can tell the story of the first time that I experienced the problem.

 it was a high frequency problem. It was an expensive problem. ideally there's something about the problem that begets other people to be involved. There's some kind of sharing or viral loop as a part of it, at least for the kinds of businesses that spawn network effects. and so, you know, when I talk to founders, I just try to understand the story of like, when did you experience this problem and is it a real problem?

 and that's basically every pitch. every pitch that I've had with an investor is just the story of. How I experienced the problem. and investors have heard so many pitches that they're able to disentangle. This is an idea that this person has, and maybe they're really convincing and expressing how that idea might be big, versus this is a really important problem that's high frequency, that's expensive, that if solved, could be a big business.

So I really just try to focus on firsthand experience.

[00:27:06] Jessica: Sorry, can I throw one more thing? And I, this was all really great advice. I do have one thing I would say, which is actually two, piggybacking a little bit on what you said about, like the solution. I think equally what happens in music tech or just creative tech is that a lot of us have this huge passion for art.

In the broadest sense, right? And we get very excited and maybe it's even, maybe we actually are very clear on what the solution is, but we're so excited about it that we actually don't think about it the way a VC would. And we like the TAM exercise, for example, is the last thing we do and we hate it.

We. Like, you have to be buttoned up on that because if you're, particularly if you're going to traditional investors and not someone say that already understands your problem or has that problem their self or an angel is, that's how they're gonna look at it. And they're gonna want the bottoms up and the tops down about how this actually becomes a really big business.

And side note, maybe like, maybe it isn't a VC business and it's still a tremendous business, statistically, you actually would do much better to never take vc, build your business to like 10 million in a RR and like bounce. Right, like you probably will take a lot less if you go VC and then unless you have this tremendous exit.

So like the, I think that's the first one is you, like you do, I think you should be hard on yourself in thinking about this the way an investor would, and make sure you have defensible answers on how this scales. The second thing I would say is I would invest in a founder that says, I don't know, because I don't think anyone knows.

I do think, however, if you are in the category of the 2% of women that are funded. Don't say you don't know. You should have an answer for everything. You should workshop all of your answers and you should always have an answer. Because again, like you are gonna get, I don't care how good your tech is, I don't care if you've like done stuff that the big tech companies are buying and that like VCs will spend the vast majority of time with you on your go to market, on your tam, on all the reasons your business is gonna fail.

And like you can see it when, like you look at DocSend, which probably some of you have used when like you send out decks, you can see where VCs spend the time when I took my male co-founder to the meetings they spend most of the time on, tech and, and like asking us about tech. If it's just me, it's all on go to market.

And like, that's what the research shows too. So like I, I think you should always have an answer. and I think if you're going to say that you don't know what the future looks like, which is the most honest answer in the world, like. That's good. But talk about the two or three ways that the future plays out and where you are still at the center of it in relation to your problem.

[00:29:33] Conor: That's sage advice. Round of applause. Yay.

Uh, so I think we have time for one more quick question and then we can open it up maybe to a few audience questions as well. you know, between all three of you, again, there's a wealth of, knowledge and experience here. You know, Stanley, Mauhan, you guys are on your second startup. Jessica, you're five plus years into successfully scaling audio shake.

So, you know, I'm sure there have been a ton of learnings Right. And mistakes. And so, you know, if you could identify maybe one mistake or learning from your prior startup that, you know, you're like, look, I'm not gonna do that again. Right? maybe identify that and talk about that. I think it could be helpful insight for the, uh, for the audience.

So maybe Stanley, we start with you.

[00:30:15] Stanley: Sure. the biggest mistake I've made is getting really excited about a vision before having product market fit. so although we've talked about how, I'm a two time founder, I'm actually a three time founder. The third company just failed, before Tone 3000.

And that was exactly the case. Like I was the first time founder. The company did really well. I had a lot of confidence. I went and started a new business, raised money for it with no traction. got. You know, as part of the fundraising process, you have to illustrate this exciting vision that people can get excited about.

 and it was all bullshit. Like we didn't have a product that anybody was using. And so I actually think vision is like, it's pretty overrated until you have product market fit. and so I would really focus if you're a first time founder and you don't have product market fit, which is the most likely.

Situation, just to completely ignore the future and focus on like what is the problem that you're solving and how do I build a product that somebody is going to use even one time, like if they use it even one time, that's good. just think about all the free products, all the free apps that are on the app store that nobody uses.

It's very hard to get somebody to use something even once. then will they come back and then after that. Get excited about your vision. If you have something that people are using with the high frequency that they're sharing, it's pretty obvious if you have something that people like and use. so yeah, focus on product market fit before, getting excited about a vision

[00:31:41] Conor: Mauhan.

[00:31:42] Mauhan: I think that's great advice by the way. I think one thing that I, I think I learned more actually in this, round than the first one. My first startup was like quite scrappy, you know, raised like a smaller seed round and was pretty fast to exit too. So it like maybe skewed my perspective. Then I think on this one, what's been really interesting is I've had so many incredibly smart people that have surrounded me, both investors, advisors, whatever.

 being able to always, this might be a little woo woo, but just like listen to yourself. and it, you get feedback like whiplash constantly, right? And it's so easy to, no matter how successful you are, just like, be like, okay, this is like this guy's, you know, he invested in TikTok and whatever, and he knows so much.

 he must be right, but honestly, no one knows you or your business better. Um, and so I think just being able to listen to your intuition, your gut, and trust it, and be able to be very good at editing. So like, edit your feedback, edit. Your data, edit everything and make sure you're, you're distilling and understanding the most important parts, I think has been the biggest lesson for me, in the last like, whatever, close to a year, I guess.

 so yeah, I'd say that's, that's probably the thing I would, I would take away is just like trust yourself. Love it.

[00:32:50] Jessica: Um,

[00:32:50] Conor: Jessica?

[00:32:51] Jessica: Yeah, I think both of those are spot on. I think probably, yeah, the most painful thing I did was, uh, the thing I mentioned earlier, just not approaching fundraising, the way you would approach any other kind of sale that you would do in your life.

And, you know, the very first time we went out to raise, I think we probably spoke to, I don't know, 50, 60, 70, like funds or angels or whatever. for the series A, it was I think less than 15. And part of that. Okay, sure. Like for, by the time you get to a, it's a different story. You have metrics, you have customers, all that kind of stuff.

But it was also that going into the a we knew the profile of the firm that like we wanted to partner with, to like what you were talking about. Like it was much more important to us to have a firm that would work with us and give us attention, I think rather than have like something big. And we went through like a, a much more thorough.

Exercise then that first time where it was very like spray and pray and a huge waste of waste of time for us and also for the people we were pitching. Like in retrospect, it wasn't respectful of their time when like they hate audio. Like don't, don't use their time up. Yeah.

[00:33:55] Conor: Love it. let's give them a round of applause please.

I mean that was a really insightful, thoughtful panel. I think we might have time for like a question or two, so if anyone has a question. Yeah.

[00:34:06] Lalo: Hi everyone. Thank you for being here. I'm Lalo. We're building the first WhatsApp integrated data entry system for the music industry. everyone is talking about raising capital.

Do you have any advice, on turning down investors and red flags and everything? 'cause that's a thing too. When you have a good product, a great micro fit team, et cetera, you have to turn down people and no one is talking about it. So thank you.

[00:34:30] Mauhan: Man fundraising advice is to go to a conference full of investors and ask a question about how you should turn down investors.

That is a masterclass.

[00:34:42] Jessica: I mean, I like founders talk and I think VCs don't always realize or appreciate the degree to which founders talk. And VCs that are jerks that don't like you, can't. VCs receive a ton of pitches every day. If they don't answer you, like, you can't hold that against them, just like you couldn't. If someone, like how many sales, random sales emails do you get in a given day in your inbox that you delete immediately?

It's like the same thing. Fine, but the. Uh, VCs that are disrespectful that, that talk bad about other founders, other companies, their firm. I mean, I remember there was one firm in the valley that I met with and I was meeting with their partners, and the partners were just insulting each other the whole time.

You know, I just think it's probably like other things in life, which is, it's bad to say like on vibes, but kind of, right. Like this is someone that's on your cap table, and if this person's on your board and you dislike them and they're a terrible human being, like that will come back and bite you for sure.

 I mean, at a minimum you're just gonna have to deal with 'em. You don't wanna deal with them. So I think, um, it, if you see things that you wouldn't like to happen to you, you should assume it would happen to you and like stay far away. But I agree, like that's a very nice problem to have.

[00:35:49] Conor: Maybe one more.

[00:35:50] Chantal: Um, so it's Chantal from, uh, click and Clear. Um, we talk a lot about investment, but there are obviously other types of funding. So have any of you gone down the route of getting loans and grants as well as investment? And if so, what were the like pros and cons of doing that?

[00:36:06] Stanley: I never done it.

[00:36:08] Mauhan: Yeah, I haven't done any, like debt things, but I've done, in the past, I've done kinda like the incubator accelerator type stuff.

so I dunno if that's relevant, but I can give some, pros and cons on that. the cons are it's very expensive. the pros are you build very strong community network and especially if you're early, you learn quite a bit. I think what's interesting now, I mean I hate to to bring it up, but I think like thinking about,

Like internet capital markets and like using like digital currencies in crypto is actually a very interesting way to start thinking about fundraising now. And I know it's like having a bad week and bad year or whatever, but I actually do think starting to explore alternate paths to funding is a, it's something that's gonna become more and more, I think just fractionalized ownership of everything is gonna become more and more prevalent.

 but I have never done anything on the debt side of you.

[00:36:52] Steve: Hi, Steve Masur, I'm a venture lawyer, you know, in the space. the question is, over identification with your company. I mean, you know, how do you deal with, if you don't, if your company isn't gonna be a good company, but. You don't want it to die because it's kind of part of who you are.

[00:37:09] Stanley: I think that's a really good question. I had to deal with that when my second company failed. just got to kind of get over it and like view life as there's gonna be successes and failures. and when my second company failed, it was very difficult. I had had a major ego death, but it was really good for me.

 I was able to disentangle, you know, my personal success from the company's success and get excited about something new. but I do think part of what's so hard about being a founder is you have to like be all in, you have to like completely full send and at the same time you have to kind of maintain this like higher level yo u that's like above everything that's going on and try to be very rational.

Like you have your heart in it, but you kind of have to look at it from above. and that's a difficult, difficult exercise to constantly be doing. You have to always believe it's gonna work, but then you also have to be worried about how it's gonna fail the exact same time. Uh, and great founders are able to, do both of those things at the same time.

 so yeah, it's just something you learn.

[00:38:10] Conor: Love it. Uh, with that, that's a wrap. One more round of applause for Stanley, Mauhan and Jessica, please. Really insightful.

Let us know what you think! Tweet @MusicTectonics, find us on LinkedIn, Facebook and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn, Twitter, and Facebook.

The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.